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The money purchase annual allowance

Updated 26 October 2026 Figures re-checked 1 November 2026
The short answer

A £10,000 limit on what you can pay into defined contribution pensions each tax year once you have flexibly accessed one, in place of the £60,000 annual allowance. HMRC says it starts the day after you first flexibly access a pension. Taking the tax-free lump sum alone, a small pot or a trivial commutation does not trigger it.

Taking money out of a pension changes what you can put back in, and the change is permanent. Draw taxable money flexibly once and the limit on tax-relieved contributions to defined contribution pensions falls from £60,000 a year to £10,000. The rule catches people who cash a pot and then find their employer’s scheme, or a late top-up, now counts against a much smaller ceiling.

The two allowances

GOV.UK says your annual allowance is the most you can save in your pensions in a tax year before paying tax, £60,000 this year (GOV.UK, Tax on your private pension contributions, checked 1 November 2026). The money purchase annual allowance of £10,000 replaces it for defined contribution pensions once you have accessed one flexibly (HMRC, Check if you’ve gone above the money purchase annual allowance, checked 1 November 2026).

HMRC says you have gone above it if you have paid over £10,000 into all of your defined contribution pensions from the day after you first flexibly accessed your pension to the end of the tax year. If the access was in an earlier year, the £10,000 covers the whole tax year (HMRC, Check if you’ve gone above the money purchase annual allowance, checked 1 November 2026).

What triggers it

The trigger is taking taxable money flexibly, and the statute names the moments. The Finance Act says the individual first flexibly accesses pension rights immediately before the first uncrystallised funds pension lump sum is paid, or immediately before the first qualifying payment from a flexi-access drawdown fund (Finance Act 2004, section 227G, checked 1 November 2026).

Two things follow. Moving money into drawdown is not itself the trigger; drawing income from it is. And a UFPLS, the withdrawal that is a quarter tax-free and three-quarters taxable, triggers it on the first payment however small. Our tax-free lump sum page covers the difference between the two routes.

What does not

HMRC’s manual says the money purchase annual allowance will not apply if a pension commencement lump sum is paid, a trivial commutation lump sum is paid, or funds from a money purchase arrangement are paid as a small lump sum (HMRC Pensions Tax Manual, PTM056530, checked 1 November 2026).

So taking the 25% tax-free cash and leaving the other 75% in drawdown, untouched, keeps the £60,000 allowance. So does clearing a pension under £10,000 as a small pot, or a set of pensions under £30,000 by trivial commutation, both on our small pots page. The manual’s example is an £8,000 pot: as a small lump sum, no trigger; as a UFPLS, a trigger.

Paying in with no earnings

Retirement does not end contributions. GOV.UK says your pension provider can claim tax relief for you at 20% on contributions up to 80% of your earnings in the year, or up to £2,880 if you have no earnings in that year (GOV.UK, Tax on your private pension contributions, checked 1 November 2026). £2,880 paid in becomes £3,600 once the 20% relief is added.

That is the route a reader with no earnings asks about, and it sits comfortably inside the £10,000 money purchase annual allowance if that has been triggered. A quarter of the eventual pot comes out tax-free, which is what makes the arithmetic attractive; the rest is taxable income when drawn.

After 75

The relief stops at 75. HMRC’s manual says that although contributions can be paid after a member has reached the age of 75, they are not relievable pension contributions and cannot qualify for tax relief, citing section 188(3)(a) of the Finance Act 2004 (HMRC Pensions Tax Manual, PTM044100, checked 1 November 2026).

Money can still go in after that birthday, but HMRC adds nothing to it, and the pot is taxed on the way out in the usual way. For the age at death, which changes the tax on what is left, see our tax on pensions hub.

If you go over

GOV.UK says that if you go over your annual allowance, either you or your pension provider must pay the tax, and that you fill in the pension savings tax charges section of a Self Assessment tax return to tell HMRC, even if the provider pays all or part of it, using form SA101 on paper (GOV.UK, Tax on your private pension contributions, checked 1 November 2026).

It adds that if you are in more than one scheme you should ask each provider for a statement, and that a calculator on GOV.UK works out how much you have gone over. The charge claws back the relief on the excess; it is not a penalty on the pension itself.

Benefits and guidance

For Pension Credit, the value of a right to receive income from a personal or occupational pension is disregarded as capital (State Pension Credit Regulations 2002, Schedule 5, paragraph 22, checked 1 November 2026), but GOV.UK says a personal or workplace pension you are entitled to and have not claimed still counts as income (GOV.UK, Pension Credit, checked 1 November 2026).

Our Pension Credit hub covers the means test.

GOV.UK says Pension Wise, part of MoneyHelper, offers a free appointment to anyone over 50 with a defined contribution pension (GOV.UK, Plan your retirement income, checked 1 November 2026). Whether to trigger the allowance, and when, is a decision for you with a regulated adviser; this page is the rule and its dates.

Common questions

What is the money purchase annual allowance?

The annual allowance is the most you can save in your pensions in a tax year before paying tax, £60,000 this year according to GOV.UK. Once you flexibly access a defined contribution pension, HMRC says you go above the money purchase annual allowance if you pay over £10,000 into all your defined contribution pensions from the day after that access.

What triggers it?

Taking taxable money flexibly. The Finance Act says you first flexibly access pension rights immediately before the first uncrystallised funds pension lump sum is paid to you, or before the first payment is made from a flexi-access drawdown fund. The provider must tell you it has happened, and you must tell any other scheme you pay into.

What does not trigger it?

HMRC's manual says the money purchase annual allowance will not apply on payment of a pension commencement lump sum, a trivial commutation lump sum, or a small lump sum from a money purchase arrangement. So taking the 25% tax-free cash and leaving the rest in drawdown untouched leaves the £60,000 allowance in place.

Can I still pay into a pension if I have no earnings?

Yes. GOV.UK says your provider can claim tax relief at 20% on contributions up to 80% of your earnings, or up to £2,880 if you have no earnings in that year. With the relief added that is £3,600 in the pension. The money purchase annual allowance, if triggered, is well above that figure.

Can I pay in after 75?

You can, but HMRC's manual says contributions paid after a member reaches 75 are not relievable pension contributions and cannot qualify for tax relief, under section 188(3)(a) of the Finance Act 2004. There is no top-up from HMRC on money paid in after that birthday, whatever your earnings.

What happens if I go over it?

GOV.UK says that if you go over your annual allowance, either you or your pension provider must pay the tax, and that you tell HMRC about it in the pension savings tax charges section of a Self Assessment return, form SA101 on paper, even if the provider pays all or part. Ask each provider for a statement.

What to read next

Small pot pensions: the £10,000 rule, three pots, trivial commutation at £30,000, and why they leave your allowances alone
GOV.UK says a pension worth up to £10,000 can usually be taken in one go as a small pot lump sum, 25% tax-free, up to three times from personal pensions and without limit from workplace ones. Where all your private pensions total £30,000 or less and include a defined benefit scheme, the lot can go as a trivial commutation lump sum. Neither triggers the £10,000 money purchase annual allowance.
Tax on a pension: what is taxed, what is tax-free, and why the first withdrawal is where people lose money
A quarter of a defined contribution pot is usually tax-free, up to £268,275. The rest is income, taxed at your marginal rate on top of the State Pension and anything else you get, and a large withdrawal in one tax year can be taxed at 40% on part of it. The first flexible payment is over-taxed on an emergency code and has to be claimed back.
Emergency tax on a pension withdrawal: why the first payment is over-taxed, which form gets it back, and how long HMRC takes
The first time you take taxable money from a pension, too much tax is usually taken, and you can claim it back. HMRC tells providers to use an emergency code (month 1), which treats a one-off lump sum as one of twelve. On a £29,250 taxable payment that puts most of it in the 40% and 45% bands for that month. The overpayment comes back on form P55, P53Z or P50Z depending on whether the pot is empty, or after the year end on a P800.
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